Businesses and Customers: Who is in Control?

Written by: Dimitris Chrysidis
Edited by: Elina Ketikidi

In this article, some thoughts about businesses and customers will be developed in order to understand better who (and if) someone is in control over the other, and the implications that this relationship has on the market.

 

With the rise of capitalism the previous century and the focus on mass production, businesses manufactured and distributed their products with less or no attention at all to customers' opinions and insights.  Today, most of the companies are taking under consideration the views of the customers and then products and services are developed.

 

Around the end of the 20^th century, there was a shift in the way that businesses operated and instead of focusing on the product, they started focusing on the customer.  They adopted a relationship orientation, in which they wanted to develop a lasting relationship with the customers, based on trust and commitment.  Moreover, the companies started prioritizing how to find out what the customer’s needs were.

But what changed and caused this shift? Technological advancements surely aided this transition, but it could have been made earlier as well, even if it would not have been as efficient as it is today. Democratization also had a part to play, since authoritarian regimes stifled civil society and put a lot of restrictions on trade in general. Still though, it would be easier for businesses to keep doing what they wanted, the way they wanted, without having to care about the consumer’s opinion.

 

There are other parameters as well that shaped the situation accordingly during the years, but a possible answer to the root cause of this shift is competition. In a competitive environment, people will always try to come up with ways in order to benefit themselves more than others.  Therefore, although for many years it was fixed that businesses focused on the product and operated in such a way, when the circumstances allowed it (or just made it easier), people to came up with a new way, to do business and to be focused on the consumer instead. This proved to be more efficient and since it had good results it created a new trend and businesses started going towards that direction.

 

If we go a bit deeper and analyze this idea, we will end up in human nature and the way people tend to behave in certain situations. To better understand this, we can look at the Prisoner’s Dilemma, which is an example analyzed in Game Theory, and in short speaks about how two rational individuals might not cooperate, even if it seems that it is beneficial for both of them to do so.  In other words, companies could all come to certain agreements (for example sell a specific kind of product at a fixed high price) in order to always have high profit. In the same way consumers could form organizations which could decide, for example, not to buy (collectively) a specific product due to low quality or high price and therefore make the company adjust the product or its price accordingly. But this rarely happens and even if it does, it doesn’t last long. So we find ourselves in a competitive environment, where people will always try to find ways to gain more than others.

 

In conclusion, it seems that there isn’t a specific answer in the question ‘Who is in control’. It rather depends on the different circumstances at various periods of time, and no matter what the result will be, the market will adjust every time accordingly.